I am looking at a very low cost single family house to add to my portfolio, and the cost is so low I am considering just paying cash for the purchase and rehab. My question is will I be able to later (6 months or so) get a mortgage for the purchase price and rehab? I would normally get a rehab loan and refi out of it after the job, but I am hoping to just skip the rehab loan step to simplify the process and save a few bucks. Does anyone have experience with this?
Im going thru the cash out phase of this now. If you have used a bank in the past for your investment properties, you might want to ask them if they still loan on investments. Mine had recently quit, so im in the process of talking to some invester friends that have recently done the same type of deals. got a good lead today so I’ll let ya know what happens. Dealing with banks & financing seems to be the head banger for most people these days.
I did the exact thing you’re wanting to do on a deal last year. Paid cash for the house, rehabbed it over a few months, and then went back to the bank and pulled what I wanted out of it. No problem whatsoever. I used the same local bank I use for my other investment properties. Like flanagan said, just talk to your bank and make sure their ok with it.
Thanks for the replies guys. I have been calling local banks but playing phone tag right now. I was wondering if I should write up a loan from me to my business for the purchase so it would be considered a refi when the time came. Any thoughts?
In my deal, it didn’t matter. We went thru a regular closing with title work done by my lawyer, flood cert, recording of documents, etc.
how many loans are in your name, and how does your income/credit look? if you have less than 4 mortgage loans, have a score of about 680, provable income where no more than 42% of your gross income is not consumed by debt payments (including the proposed new note) and a property where the loan will be no more than 80% of the property’s appraised value (rehabbed) then you should have no issue refinancing.
Normally the most likely funding would be a rate /term refi if held six month or less. meaning that if your current rate is 10% apr and the term is 12 months, then maybe you’ll qualify for 7% note with a 30 year term. seeing as to how you’re using cash,that may be a bit harder with banks acting funky. you may want to consider securing a lien against it for purchase and rehab to make refi easier
Some lenders will only let you put a 65% loan on the property.
So make sure your cost don’t exceed what they will lend.
That’s how many investors end up upside down on their mortgage.
Check first. You may have to rent it out and then refinance or sell
to make a real profit oppose to a vacant unit.
It will be a cash out loan because I will be trying to get back the money I spend on the rehab. I am not trying to get anything more than purchase price plus rehab cost, so hopefully that will help. I am only talking about $25,000 and the appraised value should be around $55k. Hopefully a less than 50% LTV will be acceptable to the banks, but who knows these days.